IN THIS ISSUE

Top 10 questions to ask about your company's ESPP
Favorable qualified ESPP tax treatment: how long must shares be held?
Articles, videos, podcast, and other resources on ESPPs
T+2 is here: what it means for stock compensation
Visit us at NASPP 2017 in DC
ESPP course among Learning Center offerings for CEP and CFP continuing education credits

NEW FEATURE! Now you can take a piece of our expertise wherever you go with our new free app for iPad/iPhone and Android: Stock Compensation Glossary. For details, see our full description of the app.

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EDITOR'S WELCOME

This issue of our quarterly newsletter showcases some of our award-winning content on employee stock purchase plans (ESPPs). Below you will find information about FAQs, articles, podcasts, and videos that give a taste of our expertise on this and every other topic in stock compensation. For much more, see our ESPP section and the ESPP portions of the Tax Center. Thanks for reading!

Don't want to wait for our quarterly newsletter updates? The myStockOptions.com Blog is the best way to stay on top of equity compensation news and the latest developments at our website. You can also follow us on Twitter.

This summer marked 17 years since we launched myStockOptions.com. We celebrated with a redesign of our home page and section landing pages to include more graphics and user-friendly design features. Thank you for using our website and for your support and feedback over the years. We continue to enjoy helping stock plan participants, ESPP participants, and their companies get more value from equity plans.

—Bruce Brumberg (Editor-in-Chief)


What are the top 10 questions I should ask about my company's employee stock purchase plan?

Employee stock purchase plans (ESPPs) can be designed in different ways and provided with various features that make them appealing to participants. Before you enroll in your company's ESPP, however, you should be sure to know the answers to the following questions.

1. What type of ESPP is it?

2. Am I eligible to participate?

3. Does the ESPP have a purchase discount?

4. Does the plan have a lookback feature?

5. How long is the offering period?

6. Are there purchase periods within the offering period? If so, does the plan have a reset provision?

7. How do I enroll in the ESPP? Once enrolled, am I automatically enrolled in subsequent offering periods?

8. Is there a maximum contribution amount/percentage and number of shares I can purchase with my eligible compensation?

9. How and when can I increase or decrease my contribution percentage, or withdraw from an offering?

10. What account is used for purchased shares? Is there a mandatory holding period in that account after share purchases?

In addition, you should understand the tax treatment, and you should familiarize yourself with the documents that your company provides in printed and/or online form.


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FAQ: For how long must I hold shares purchased under a Section 423 ESPP to receive favorable tax treatment?

To get favorable long-term capital gains treatment, you have to hold the shares purchased under a Section 423 ESPP for more than one year from the purchase date and more than two years from the grant (or enrollment) date. The timeline below illustrates the concept of the holding period, showing how long you must keep the shares to prevent a disqualifying disposition and make a qualifying disposition at sale.

However, even if you hold the stock long enough, not all of the gain over your purchase price will be capital gain. For more, including an example showing the tax breakdown, see the full FAQ. For other examples of ESPP taxation when shares are sold, see a related FAQ.

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Articles, Videos, And Other Resources On ESPPs

Below we list selected articles, videos, and podcasts about ESPPs in the award-winning content of myStockOptions.com. The extensive section on ESPPs at myStockOptions.com is complemented by an interactive quiz and a self-study course and exam for CFP and CEP continuing-education credits. All of this content is available with Premium or Pro Membership or through corporate licensing.

ARTICLES

Six ESPP Essentials, by the myStockOptions editorial team
This two-part article series explains important ESPP aspects and concepts in plain English. Part 1 discusses the basics of ESPP participation, such as enrollment rules, plan types, and offering/purchase periods. Part 2 covers holding periods, tax rules, and the impact of various events, both personal (e.g. job loss) and corporate (e.g. M&A).

ESPPs 101: Key Dates And Terms You Must Know, by the myStockOptions editorial team
Your employee stock purchase plan (ESPP) may be one of the best benefits your company offers. However, to maximize its value, you must know its key dates and terms. This article explains the basics you need to know for your ESPP participation.

ESPPs 101: Taxation Made Simple, by the myStockOptions editorial team
To make the most of your company's ESPP, you must understand the tax consequences of participation. This article explains the basics of ESPP taxation.

Fundamentals Of Employee Stock Purchase Plans, by Alisa Baker
Your company's employee stock purchase plan (ESPP) may be one of your best employee benefits. However, to maximize the value of your ESPP, you need to understand how it works. This four-part series covers all aspects of ESPPs, from the basic to the complex. Part 1 is free to all registered users of the site.

Are You Taking Full Advantage Of Your Company's Employee Stock Purchase Plan?, by Sandra Sussman
Strangely, many employees don't take advantage of their companies' employee stock purchase plans. This article will show you exactly why ESPPs are a good deal.

Ten Financial-Planning Rules Every ESPP Participant Should Know, by the myStockOptions editorial team
NEW! Employee stock purchase plans (ESPPs) are a super deal. However, the related taxation and financial planning can be deceptively complex. This article presents the essential points that you should understand before you participate in your company's ESPP.

ESPP Contribution Limits And Why They Matter To You, by Bruce Brumberg
NEW! If you are enrolled in a tax-qualified employee stock purchase plan, the amount of company stock that you are allowed to purchase is limited. You will want to keep this in mind when you allocate part of your salary to your ESPP. Read this article to understand how the contribution limits affect your ESPP planning.

IRS Form 3922 For ESPPs: What You Need To Know, And How It Can Help You Understand ESPP Taxation, by Bruce Brumberg
Stock purchases made through an ESPP during a calendar year are reported to you and the IRS on Form 3922 early in the following year. This article explains what you need to know about the information on the form, and how the form can help you better understand the complexities of ESPP taxation.

Employee Stock Purchase Plans And Your Financial Planning, by Bruce Brumberg
ESPPs are popular and prevalent at most public companies. However, the structure of these plans is changing. As this two-part article series shows, these modifications may affect your decision to participate in your ESPP and its place in your financial planning.

ESPP Choices: Flip Or Hold?, by Timothy Farmer and Gregory Geisler
After you decide to participate in your company's ESPP, you must choose whether to sell the stock soon after purchase or to hold it (and for how long). This two-part article series examines different ways to participate in your ESPP according to relative risk tolerance, timeframe, and needs for money.

VIDEOS

Employee Stock Purchase Plans (ESPPs): Core Concepts & Benefits
Running time: 3:35. Bruce Brumberg, the editor-in-chief of myStockOptions.com, clearly explains both the fundamentals of employee stock purchase plans (ESPPs) and the benefits that ESPPs can provide. Using animated examples, this video covers key ESPP concepts, including the offering period, the purchase date, lookbacks, and discounts.

Employee Stock Purchase Plans (ESPPs): Key Rules & Decisions
Running time: 2:53. Bruce Brumberg, the editor-in-chief of myStockOptions.com, clearly explains the important rules you must know and the key choices you will have to make when you participate in an employee stock purchase plan (ESPP). Topics include ESPP features and the related basic financial-planning concepts.

Employee Stock Purchase Plans (ESPPs): Taxes
Running time: 4:24. Bruce Brumberg, the editor-in-chief of myStockOptions.com, clearly explains the five key tax rules you must know when you participate in an employee stock purchase plan (ESPP). Illustrated by animated examples, the covered concepts include the special rules that depend on how long you hold the shares.

PODCASTS

Podcast! Basics Of ESPPs, by Bruce Brumberg
In this eight-minute podcast, the editor-in-chief of myStockOptions.com explains how ESPPs work, including enrollment, offering periods, lookbacks, purchase, and taxation.

INTERACTIVE QUIZ

Test your smarts with our free interactive quiz on ESPPs. In addition to being fun, the quiz is also a course of study. The answer key links to content on the topic for followup reading.

PRESENTATION

Employee Stock Purchase Plans: Qualified And Nonqualified Plans, by Bruce Brumberg
Bruce Brumberg, editor-in-chief of myStockOptions.com, developed this presentation for talks and meetings on the basics of employee stock purchase plans. Covered topics include types of ESPP, the ESPP tax treatment, and survey data on the use of ESPPs by companies. (Premium members may request permission to use the PowerPoint version at their companies.)

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Insider Trading Prevention And Education:
Think Twice Video And Intranet Series
Request free previews at the Think Twice website

Insider-trading prosecutions are a major priority of the SEC and the Justice Department. For two decades, the dramatic Think Twice video series has been a vital training and compliance resource for thousands of corporations and law firms trying to prevent insider-trading violations. The Think Twice videos are celebrated for enhancing the value of corporate education by entertaining viewers with compelling stories.

Used by over 1,000 companies and developed with input from the SEC Enforcement Division, these powerful and memorable story-lines will drive home key points on:

  • what insider trading is
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For more information on the Think Twice video series, and a free white paper on insider trading prevention and education, see the Think Twice website. Both DVD and VHS formats are available. Qualified corporate buyers, including new IPO companies, can request free previews. Intranet licensing is available.

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T+2 Is Here: What It Means For Stock Compensation

With effect from September 5, 2017, the settlement period for securities transactions was shortened from three to two business days after the trade date. This interval is expressed in the notation T+2, in alignment with the notation used to indicate the previous three-day settlement period (T+3).

T+2 is an important concept for any stock plan transactions that involve open-market sales, such as same-day sales and sell-to-covers. For example, in a cashless exercise of stock options or in a stock sale at restricted stock/RSU vesting or after ESPP purchase, the cash will now show up in your brokerage account sooner, within two days after the execution date. Additionally, to settle by T+2, the broker must, sooner than previously, receive the shares and know the funds to send the company to cover the exercise cost and/or the tax withholding. Companies may also now need to give withheld taxes to the IRS sooner after NQSO exercise and restricted stock vesting.

Details of the change to the T+2 settlement cycle are available at a website operated by US financial-services industry. The main reason for the move to a shorter period was to reduce risk in the securities-settlement process. A blog commentary from the NASPP provides background on the change, details about it, and what T+2 means for companies, stock plan brokers, and employees.

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Visit Us At The NASPP Annual Conference In Washington, DC

We are excited about the NASPP's annual conference, being held this year in Washington, DC (October 17–20). As always, myStockOptions.com will have its cheerful booth in the exhibit hall, where our editor-in-chief Bruce Brumberg will be available as an NASPP-designated expert to answer questions on stock plan education/communications and on equity comp taxation.

If you attend the conference, please stop by our exhibit booth for a chat and pick up a myStockOptions.com souvenir!

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AdvisorFind Directory
Find a financial, tax, or legal advisor with experience in stock compensation

Stock compensation raises many questions.

  • How much should you contribute to your ESPP?
  • When should you exercise stock options?
  • Should you sell or hold restricted stock at vesting?
  • How can you diversify your company stock holdings?
  • How can you minimize your tax bill?
  • How do you negotiate for stock compensation in your employment agreement?

While myStockOptions.com is a good place to learn about concepts, issues, and general strategies in equity compensation, at some point you may need an advisor to help with your unique situation. Yet finding a good advisor can be hard when you are busy and don't know where to start. The AdvisorFind Directory from myStockOptions.com is for you.

  • Identify and contact an expert who can provide specialized professional guidance on equity compensation.
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  • Look up resources for performing background checks on advisors.

Searching AdvisorFind is free and does not require registration at myStockOptions.com.


Need CE Credits? Learning Center At myStockOptions.com Offers Credits For CEPs, CFPs, And Other Professionals

The myStockOptions.com Learning Center has courses of study and exams that offer:

  • 30 continuing-education credits for Certified Equity Professionals (100% of the total requirement!)
  • 15 continuing-education credits for Certified Financial Planners

The course and exam on employee stock purchase plans covers all of the key information that you must know to be well informed about ESPPs. Each course of study features podcasts, videos, articles, and FAQs from myStockOptions.com. They are woven into a dynamic, interactive learning tool that teaches the topics in a memorable way. The answer key for each exam also links to relevant content on the site for further reading and learning.

Other courses offered through the myStockOptions Learning Center focus on nonqualified stock options, restricted stock/RSUs, SEC law for stock compensation, and financial planning with equity awards. Built on a similar model, the the myNQDC.com Learning Center on nonqualified deferred compensation offers up to 6 continuing-education credits for Certified Financial Planners, 6 Professional Achievement in Continuing Education (PACE) credit hours for CLU® and ChFC® certifications, and up to 12 CPE hours for credentialed ASPPA members.

COMING SOON: The Investment Management Consultants Association (IMCA) has approved myStockOptions.com as a CE provider for the CIMA, CIMC, and CPWA certifications. We will soon be offering continuing-education credits for advisors with those designations.

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